Section 197-Certificate for deduction of TDS at lower rate

Section 197-Certificate for deduction of TDS at lower rate- The Income Tax department permits the relief from deducting TDS at a lower or nil rates under Section 197 of the Income Tax Act, to those taxpayers whose final tax liability for the financial year is going to be nil or less than the TDS rate applicable on a particular income. He must be applied in the prescribed form 13 to the Jurisdictional Assessing Officer (AO). If he does not apply for the Lower / Nil TDS certificate, he can still claim a TDS refund by filing his Income Tax Return. An Assessing Officer can grant relief from TDS provisions, if the Officer is satisfied that the existing and estimated tax liability of a person will be lower than the amount of TDS deducted and provide sufficient grounds for the same.

Normally, TDS is to be deducted at prescribed rates of TDS, i.e. from Salary, Rent, Professional payment, Commission, Interest etc. by payer and remitted to the Government. TDS exemption / lower TDS is not applicable under sections 194B, 194BB, 194DA, 194E, 194IA.

• If the tax is deducted under section 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194LA & 195 and the assessee feels that no or lower tax deductions of TDS should be there, then the following procedure should be undertaken.

1. An application to be filed in prescribed Form 13 to the Jurisdictional Assessing officer (AO) for nil/lower deduction of TDS.
2. The application should be properly filed, it should contain the complete and correct details.
3. The Assessing officer may be dispose of the applications within a frame of 30 days.
4. If the Assessing Officer is satisfied then, will process the issuance of the certificate.
5. After issuance of the said certificate, attach the copy of this certificate with invoice given to the deductor.
6. The said certificate is only valid for a specified Assessment year mentioned in the certificate or until the Assessing Officer cancels it.
7. The deductor can use the certificate number and deduct the TDS at lower/nil rate.
8. The deductor has to mention the certificate number on his TDS return for lower/nil deduction of TDS. .

FORM 13 is an application form for lower/nil deduction of TDS u/s 197. The said form to be submitted with his jurisdictional Assessing Officer, along with the following details is as under-

• Name and PAN
• Details regarding the purpose for which the refund is being received
• Details of income of last three years and the projected current year’s income
• Details of payment of tax of last three years
• Details of tax deducted/paid for the current year

(1) An application by a person for a certificate under sub-section (1) of section 197 shall be made in Form No. 13 electronically,

(i) Under digital signature; or

(ii) Through electronic verification code.

(2) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall specify procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the furnishing of Form No.13.

[28AA . (1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:—

(3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.

(4) The certificate for deduction of tax at any lower rates or no deduction of tax, as the case may be, shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate:

Provided that where the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate.

(5) The certificates referred to in sub-rule (4) shall be valid only with regard to the person responsible for deducting the tax and named therein and certificate referred to in proviso to the sub-rule (4) shall be valid with regard to the person who made an application for issue of such certificate.

(6) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down procedures, formats and standards for issuance of certificates under sub-rule (4) and proviso thereto and the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the issuance of said certificate.]